Sunday, 17 November 2013

Russia Waits As Ukraine Baulks At Terms Of EU Deal

KIEV, Ukraine -- With Ukraine’s continuing failure to release former prime minister Yulia Tymoshenko from jail comes a growing impression that president Viktor Yanukovich and his allies have decided it is better to deal with the devil you know – preferring to rebuild strained ties with old ally Russia rather than enter into historic agreements with the European Union.
Parliament in Kiev was deadlocked again yesterday over what to do about Ms Tymoshenko, whom the EU sees as the victim of political persecution by courts loyal to Mr Yanukovich.
If she is not freed before a major EU summit in Lithuania on November 28th, Ukraine will not be offered landmark political and trade deals that would weaken Moscow’s centuries-old grip on the country and align its future with the West.
Feared rival Yanukovych, her most popular rival, who has vowed to topple him and investigate the allegedly ill-gotten gains of his supporters and his own family.
He may see it as too risky to release her ahead of a presidential election in 2015.
But if he is to abandon – or pause on – Ukraine’s European path, Yanukovich must quickly repair relations with Moscow, which have been damaged by his flirtation with Brussels.
From President Vladimir Putin down, Russian officials have made it clear that if Ukraine signs the deals with the EU this month, nothing will ever be the same between them again.
“That’s why we warn in advance, we say: listen, we understand everything. This is your choice, do it. But keep in mind that we would have to somehow protect our market, to introduce protective mechanisms,” Mr Putin said recently.
Sergei Glazyev, Putin’s economic adviser, was more blunt:
“We have no idea why Ukraine is signing this agreement . . . It will cut the roots of our economic co-operation.”
On another occasion, he predicted that Ukraine’s loss of business with its main trading partner would be disastrous for the country.
“Who’ll pay for Ukraine’s default, which will be inevitable?” he asked.
In the last few months, Russia temporarily imposed new checks on its border with Ukraine, causing huge delays for road traffic, and banned the import of chocolate from the Roshen factory, owned by a key proponent of Kiev’s greater integration with the EU.
Moscow has also demanded payment of an overdue €640 million ($861 million) gas bill, amid a long-standing dispute with Kiev over the price it charges for fuel, raising the spectre of the kind of “gas war” that affected the transit of Russian gas supplies through Ukraine to the EU in 2006 and 2009.
“We understand there would be possible negative effects of signing the agreement with the EU,” Ukraine’s deputy foreign minister, Andriy Olefirov, told The Irish Times.
“But we are equals (with Russia) and having support from the EU will help us on many issues, like getting a fair price for gas.”
“The Roshen issue, gas prices and possible shortages are all negative. But after the Lithuania summit we will see positive things – the EU agreement will also help us get a fair deal from the International Monetary Fund, and the EU has €610 million ($821 million) in the bank waiting for us.”
Analysts say Ukraine may need more than €10 billion ($14 billion) in emergency funding from the IMF, and agreement between Kiev and the EU may help overcome an impasse over the conditions attached to the deal.
From Russia with love
Russia has offered its own inducements to Kiev to reject the EU, suggesting that it could get a discount on its gas price and funding – with few strings attached – from Moscow.
As the days slip by, Ms Tymoshenko remains in jail, the likelihood of an EU agreement at the summit in Lithuania diminishes, and Ukraine looks more likely to remain firmly in Russia’s orbit.
Mr Yanukovich has met Mr Putin twice in the last fortnight.
Details of what they discussed were not revealed, but prime minister Mykola Azarov assured Ukraine that “the president and government are doing everything they can to restore normal trade and economic relations” with Russia.